In Brief: CLO Edition
2018 Mar 19
Today's Top Story
U.S. Tech Companies Win Changes in Bill to Limit China Access to Technology
Lawmakers pushing legislation aimed at preventing China from acquiring sensitive U.S. technology have proposed relaxing elements of the measure after lobbying by high-tech firms, but will tighten another portion, according to a draft revision seen by Reuters. The bill in the U.S. Senate and a companion measure in the U.S. House of Representatives aim to broaden the reach of the Committee on Foreign Investment in the United States (CFIUS) as a means of halting Chinese efforts to acquire sophisticated U.S. technology. The bipartisan legislation has the support of the White House, reports Reuters (15 March, Bartz). Tech companies criticized the original legislation amid concerns it could limit or slow their exports. Google parent Alphabet Inc., Facebook Inc., IBM Corp., Intel Corp., and Qualcomm Inc. are among the companies that have been lobbying for the changes.
Whistleblower Charges Walmart Misled on E-Commerce Data in Catch-Up Race With Amazon
A whistleblowing former employee alleges Walmart issued misleading e-commerce data in its race to catch up with retail rival Amazon.com, and then fired him in retaliation when he refused to stop complaining about the practice. On 15 March, Tri Huynh, a former Walmart director of business development, charged in a federal lawsuit that the company used questionable practices to "paint an overly-optimistic picture" of its e-commerce results as it vies with Amazon for the title of world's largest retailer. Huynh said corporate superiors brushed off his complaints. After he sent his allegations to top Walmart executives in January 2017, the company fired him, Huynh alleged. Walmart said Huynh's allegations lack merit, reports USA Today (15 March, McCoy).
Mergers and Acquisitions
Big Water Companies Set to Merge
On 15 March, SJW Group announced plans to merge with Connecticut Water Service Inc. The roughly US$750 million deal would create America's third-biggest publicly traded water utility based on rate base and enterprise value, trailing only American Water Works Co. and Aqua America Inc., reports the Wall Street Journal (15 March, Lombardo). The deal also represents a rare tie-up among such companies. SJW shareholders will own nearly 60 percent of the combined company, which would serve over 1.5 million customers in California, Connecticut, Maine, and Texas.
Hong Kong's Richest Man Li Ka-shing Retires
Li Ka-shing has announced his retirement after a 68-year career amassing one of Asia's biggest fortunes from building skyscrapers to selling soap bars. The 89-year-old chairman of CK Hutchison Holdings Ltd. and CK Asset Holdings Ltd. will stay an adviser to the group after stepping down in May. Elder son Victor, 53, will take over a conglomerate that touches the lives of practically everyone in Hong Kong—the family's Power Assets Holdings Ltd. generates their electricity and ParknShop supermarkets sell their groceries, reports Bloomberg (16 March, Einhorn, Ho). The group also operates mobile-phone stores and Superdrug and Savers in the U.K., owns ports around the world, and has a controlling stake in Husky Energy Inc. in Canada.
Nike Executive Leaves After Workplace Behavior Investigation, Report Says
Nike has conducted a probe of inappropriate workplace behavior and announced the departure of a top executive who was considered a possible candidate to eventually become CEO. Trevor Edwards, the Nike brand president, will leave immediately and retire in August. CEO Mark Parker said Edwards will remain as his advisor until he retires. Parker also made an internal announcement in a memo, but it did not specify what the complaints were about or whether they involved Edwards or other executives, reports USA Today (15 March, Woodyard). Nike was acting on reports of "behavior occurring within our organization that do not reflect our core values of inclusivity, respect, and empowerment," Parker wrote. Parker said he plans to stay on as chairman, president, and CEO beyond 2020.
In Canada, Women Making Slow Progress Reaching the C-Suite
Each year, the "Rosenzweig Report on Women at the Top Levels of Corporate Canada" tracks the number of women who hold the highest executive positions at Canada's 100 biggest publicly-traded companies. These C-suite leaders are critical when it comes to changing corporate culture and enhancing diversity, reports Hunt Scanlon Media (15 March). Currently, 51 women hold the highest executive positions at Canada's 100 biggest publicly-traded companies, up from 48 a year earlier and more than double the 23 women with those jobs in the first Rosenzweig Report in 2006. However, women now hold just 9.4 percent of these jobs, compared to 9 percent a year ago, and 4.6 percent in 2006. Still, of the 100 largest companies in Canada, 40 have at least one woman in a top leadership role, up one from the previous year.
EU May Impose New 3 Percent Tax on Tech Companies' Revenues
U.S. technology companies could end up paying billions of dollars in new taxes under a plan the European Commission is considering. A draft report seen by the Financial Times reportedly states that a "digital tax" would be assessed against companies' revenues instead of their profits. The tax, likely to be set at 3 percent, would apply to tech firms with more than 100,000 users in Europe and cover everything from ad revenue from Alphabet Inc.'s Google to subscription fees for companies like Apple Inc. The tax could be announced next week in Brussels and is estimated to raise about 5 billion euros a year, reports MarketWatch (15 March, Murphy). However, the draft is likely to face stiff opposition from U.S. tech groups even as such EU member states as France and Germany take the various tech companies to task for not paying their fair share in EU taxes.
Former Qualcomm Chairman Seeks Funding for Buyout
Paul Jacobs, the recently demoted chairman of Qualcomm, has approached several global investors in an effort to acquire the US$90 billion chipmaker, in what would be one of the largest buyout deals in history. The move comes days after U.S. President Donald Trump blocked Broadcom's hostile bid for the San Diego-based company, citing national security concerns, reports the Financial Times (15 March, Fontanella-Khan, Braithwaite, Massoudi). The longtime Qualcomm director has informed members of the board about his plan to launch a buyout, according to three people with direct knowledge about the matter. SoftBank, the Japanese conglomerate that controls the US$100 billion tech-focused Vision Fund, is one of the potential partners approached by Jacobs, according to one of the people with knowledge about his plan.
Virgin Atlantic Makes First Loss in Four Years
Virgin Atlantic has made its first loss in four years after the U.K. airline was hit by problems with the Rolls-Royce engines that power its Boeing 787 Dreamliners and a weak pound that hurt U.K. demand. On 15 March, the group reported a £28.4 million loss before tax and exceptional items for 2017, compared with a £23 million profit a year ago, reports the Financial Times (15 March, Powley). The U.K. carrier, which is 49 percent owned by U.S. carrier Delta Air Lines, has had a tough year after all of its Boeing 787 Dreamliners, which make up a third of its fleet, were affected by faults with the Rolls-Royce Trent 1000 engine. The problems have caused disruption and costs for Virgin Atlantic, which has been forced to ground up to four of its aircraft at a time for repairs, as well as lease additional planes.
Retail Sales Fall for a Third Straight Month; Auto, Gas Purchases Fade
U.S. consumers spent less at auto dealers, gas stations, and department stores last month, causing overall retail sales to slip 0.1 percent. February marked the third month in a row of declining retail sales, the Commerce Department said, though they are still up 4 percent from a year ago. Shoppers have opened the new year with a cold spell after robust spending gains in the months leading up to the 2017 holiday season. So far, the promise of higher take-home pay from President Trump's tax cuts appears to have had little influence on spending for big-ticket items such as autos, reports USA Today (14 March, Boak). The public has also continued its migration to such online outlets as Amazon and away from traditional brick-and-mortar retailers. Automobile sales slipped 0.9 percent in February, while purchases at gas stations fell 1.2 percent and department stores sales were down 0.9 percent.
Coles Spinoff Plan May Put Australian Supermarket Giant in Play
Wesfarmers Ltd.'s plan to spin off its Coles supermarkets, liquor, and convenience stores could put the Australian retailing giant in play. The business, which generated AU$39.2 billion (US$30.5 billion) in sales from 2,500 stores in fiscal 2017, could be attractive to a buyer looking to make a big splash in Australia, according to Citigroup Inc.'s Sydney-based credit specialist Anthony Ip. Coles's food, liquor, and convenience stores are valued at about AU$21 billion (US$16.3 billion), according to Credit Suisse Group AG analysts. However, the division's first-half operating profit fell 14 percent after a bruising price war with rival Woolworths Group, reports Bloomberg (15 March, Cadman).
Corporate Social Responsibility
Shareholder Support for Climate-Change Proposals Grows in the Second Half of 2017
Shareholder support for climate-change proposals gained momentum in the second half of 2017, according to a joint report from PricewaterhouseCoopers (PwC) and Broadridge Financial Solutions. The report analyzed votes at 1,040 annual meetings between 1 July and the end of the year. Researchers found that average shareholder support for climate-change proposals increased to 30 percent in the third and fourth quarters, an increase from 27 percent during the same six-month period the year before, reports Pensions & Investments (16 March, Kilroy). PwC and Broadridge noted that a number of climate-change proposals received majority support for the first time in 2017.